The Nasty Habits of Reality

BALTIMORE – People never intend to bring disasters upon themselves. But they sometimes put themselves in situations in which disaster is the only way out.

The War Between the States was supposed to be quick and decisive. The glorious histories of the war were already written – at least in the minds of the combatants – by the time of the First Battle of Bull Run.

General Thomas “Stonewall” Jackson inspects the action at the First Battle of Bull Run. Confederate observers were suitably impressed. We’ve got this in the bag, they said to themselves. Let’s start writing the history books!

A Very Odd Growth Spurt in the True Money Supply

The growth rates of various “Austrian” measures of the US money supply (such as TMS-2 and money AMS) have accelerated significantly in recent months. That is quite surprising, as the Fed hasn’t been engaged in QE for quite some time and year-on-year growth in commercial bank credit has actually slowed down rather than accelerating of late. The only exception to this is mortgage lending growth – at least until recently. Growth in mortgage loans is still very slow though, especially compared to historical growth rates. It cannot really account for the recent surge in money supply growth either.

Year-on-year growth rates of TMS-2 (11.19%, black line) and total loans and leases at commercial banks (7.7%, red line) as of October. In absolute terms money TMS-2 has soared by a staggering $840 billion since the beginning of the year – click to enlarge.

A Brief Recap

India’s Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes will no longer be legal tender. Linked are Part-I, Part-II, Part-III, and Part-IV, which provide updates on the rapidly encroaching police state

Expect a continuation of new social engineering notifications, each sabotaging wealth-creation, confiscating people’s wealth, and tyrannizing those who refuse to be a part of the herd, in the process destroying the very backbone of the economy and civilization.

There are clear signs that in a very convoluted way, possession of gold for investment purposes will be made illegal. Expect capital controls to follow. Chaos from people’s inability to access the money in their bank accounts is now spreading to the people who have so far been unaffected: the middle class.

This is a completely unnecessary man-made disaster, with the single aim of glorifying Narendra Modi.

Donald vs. the Swamp

BALTIMORE – Judging by the Diary mailbag, dear readers would like to see a more positive attitude towards the president-elect. We would like to take a more positive approach; we like wishful thinking as much as anyone. In particular, we’d like to see Mr. Trump do away with the inheritance tax.

A message from the swamp thing: all you’ll get is a maw-full of muck – it is knitting itself back together already. And besides, it is ticked off.

A Plethora of Reasons

We’ve gone through a succession of events and processes that were supposed to make gold go up. The following list is by no means exhaustive:

Quantitative Easing

Bernanke’s Helicopter Drops

Janet Yellen’s Keynesianism

Obama’s Deficits (US government debt is now a hair away from $20,000,000,000—and that’s just the little part of it they put on their balance sheet)

The election of Trump

The Italian Referendum (current as we write this)

We knew it! The darn thing is simply too heavy to go up! But it is going to get a boost now, because the vast majority of mainstream analysts who turned bullish as the rally earlier this year was close to ending have turned bearish by now…[PT]

Bad Monday

Some Monday mornings are better than others. Others are worse than some. For one Amazon employee, this past Monday morning was particularly bad.

No doubt, the poor fellow would have been better off he’d called in sick to work. Such a simple decision would have saved him from extreme agony. But, unfortunately, he showed up at Amazon’s Seattle headquarters and put on a public and painful display of madness.

Good-bye cruel world! On this our planet, ignoring air friction, wind and other buoyancy-enhancing obstacles for the sake of this example, someone jumping off a building that is high enough will eventually attain a terminal velocity of 122 miles per hour. The acceleration is 32.2 feet per second², which is why one has to start from an appropriate height (a skydiver in a spread-eagle position will typically reach terminal velocity after about 12 seconds, traversing a distance of 1,483 feet). Jumping without a parachute may provide an especially pronounced adrenaline high, but is generally not advisable; more often than not it will be a one-off experience.

A Market Gripped by Fear

The Indian Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes would no longer be legal tender. Linked are Part-I, Part-II and Part-III updates on the rapidly encroaching police state.

The economic and social mess that Modi has created is unprecedented. It will go down in history as an epitome of naivety and arrogance due to Modi’s self-centered desire to increase tax-collection at any cost.

Democratic Fantasy

BALTIMORE – Fidel Castro was regarded as a revolutionary and a “change agent.”

But he is better understood as a throwback, more of a counter-revolutionary than a real revolutionary. The real revolution in human affairs happened long before he was born… and is still going on – the revolution led by civilized free-market capitalism.

Finger-wagging Fidel Castro on the cover of TIME in 1965, which by this time accused his revolution of “decaying”. The US government initially continued to subsidize Cuba in the wake of Castro’s takeover as he had given less than truthful assurances that the “handful of communists” in his cabinet had no influence on Cuba’s policies. The Batista government’s economic policies had a great many statist features as well, so at first it seemed as though the differences between the two regimes would only be marginal – mainly, someone else would do the stealing. By the time the above cover story was published, the US was waging a full-scale economic war against Cuba. It is rare for a classical peasants’ revolt to actually succeed. Castro’s victory over Batista was quite a feat in that sense; not surprisingly, it elicited the admiration of Leftists the world over. Castro was not a Stalinist, presumably not least because Khrushchev had “de-Stalinized” the Soviet Union, but he did declare himself a Marxist-Leninist (which Stalin incidentally had claimed to be as well). The political Left’s misguided admiration for Castro never wavered though.

Free Money!

BALTIMORE – Last week, the Dow punched up above 19,000 – a new all-time record. And on Monday, the Dow, the S&P 500, the Nasdaq, and the small-cap Russell 2000 each hit new all-time highs. The last time that happened was on the last day of December 1999.

Ironically, two events that were almost universally expected to trigger large stock market declines were followed by quite rapid and strong gains. Would the market have fallen if Hillary Clinton had won the presidential election? That would have confounded expectations as well. Also, the S&P 500 declined for nine days in a row (even if not by much) just before the election – at the time Clinton was still widely expected to win. it remains to be seen whether and for how long the recent discounting of Nirvana will last – click to enlarge.

A Brutal Communist Dictator Shuffles Off This Mortal Coil

The death of the brutal Cuban Communist dictator Fidel Castro closes the door, in some respect, on another disastrous page in US foreign policy history. For all the denunciations and criticism of Castro from conservative elements and exiled Cubans, his despotic rule was the outcome of decades of American imperialism which began with President William McKinley’s infamous decision to wage war on hapless Spain in 1898.

Fidel Castro, the long-time Marxist dictator of Cuba. Not surprisingly, he was another finger-wagger. When he graced the cover of TIME magazine in 1965, he was shown wagging his finger as well, a tradition he kept up until shortly before his demise (similar to many other communist rulers, he loved to give nigh interminable speeches, a special form of torture for those forced to sit through them and applaud at the appropriate moments). Castro replaced the Batista regime, also an oppressive and corrupt regime, but of the military junta type – which the US supported. Communists like Castro came to be widely seen as the vanguard in the fight against imperialism, especially among Western youth in the 1960s. Young people at the time were correct in opposing imperialism, but they were extremely naïve and misguided in their support of Marxism. They failed to realize that they were nothing but useful idiots for people like Castro and his fellow Marxists. Wherever Marxist revolutions succeeded, the result was that one oppressive and murderous regime was replaced with another.

Hidden Motives

It is well-known that India’s government wants to coerce its population into “modernizing” its financial behavior and abandoning its traditions. The recent ban on large-denomination banknotes was not only meant to fight corruption.

Obviously, this very bad Indian has way too much cash. Just look at him, he looks suspicious!

Most read in the last 20 days:

When Money Dies
In part-I of the dispatch we talked about what happened during the first two days after Indian Prime Minister, Narendra Modi banned Rs 500 and Rs 1000 banknotes, comprising of 88% of the monetary value of cash in circulation. In part-II, we talked about the scenes, chaos, desperation, and massive loss of productive capacity that this ban had led to over the next few days.
Indian prime minister Narendra Modi – another finger-wagger, as can be seen in this...

A Market Gripped by Fear
The Indian Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes would no longer be legal tender. Linked are Part-I, Part-II and Part-III updates on the rapidly encroaching police state.
The economic and social mess that Modi has created is unprecedented. It will go down in history as an epitome of naivety and arrogance due to Modi’s self-centered desire to increase tax-collection at any cost.
Indian jewelry...

Hidden Motives
It is well-known that India's government wants to coerce its population into “modernizing” its financial behavior and abandoning its traditions. The recent ban on large-denomination banknotes was not only meant to fight corruption.
Obviously, this very bad Indian has way too much cash. Just look at him, he looks suspicious!
Photo via thenewsminute.com
In fact, as our friend Jayant Bhandari has pointed out, fresh avenues for corruption ...

A Brief Recap
India's Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes will no longer be legal tender. Linked are Part-I, Part-II, Part-III, and Part-IV, which provide updates on the rapidly encroaching police state
Expect a continuation of new social engineering notifications, each sabotaging wealth-creation, confiscating people’s wealth, and tyrannizing those who refuse to be a part of the herd, in the process destroying the very backbone of the...

Bad Monday
Some Monday mornings are better than others. Others are worse than some. For one Amazon employee, this past Monday morning was particularly bad.
No doubt, the poor fellow would have been better off he’d called in sick to work. Such a simple decision would have saved him from extreme agony. But, unfortunately, he showed up at Amazon’s Seattle headquarters and put on a public and painful display of madness.
Good-bye cruel world! On this our planet,...

Free Money!
BALTIMORE – Last week, the Dow punched up above 19,000 – a new all-time record. And on Monday, the Dow, the S&P 500, the Nasdaq, and the small-cap Russell 2000 each hit new all-time highs. The last time that happened was on the last day of December 1999.
Ironically, two events that were almost universally expected to trigger large stock market declines were followed by quite rapid and strong gains. Would the market have fallen if Hillary Clinton had won...

A Major Crisis
Last week Jayant Bhandari related the story of the overnight ban of certain banknotes in India under cover of “stamping out corruption” (see Gold Price Skyrockets In India after Currency Ban Part 1 and Part 2 for the details).
Banned 500 rupee banknotes
The problem is inter alia that the sudden ban of these banknotes has hit the Indian economy quite hard, given that 97% of all transactions in the country are cash-based. Not only that, it has...

Permanently Skewed
TRUMP HOTEL, New York – Trump’s rambling army – professionals, amateurs, camp followers, and profiteers – is marching south, down the I-95 corridor. There, on the banks of the Potomac, it will fight its next big battle.
Lieutenants in Trump's army: Bannon, Flynn & Sessions
Photo credit: Drew Angerer / AFP
Here at the Diary, we do not like to get involved in politics. But this is a special time in the history of our planet – a...

Stumped by the Bust
In the slump of a cycle, businesses that were thriving begin to experience difficulties or go under. They do so not because of firm-specific entrepreneurial errors but rather in tandem with whole sectors of the economy. People who were wealthy yesterday have become poor today. Factories that were busy yesterday are shut down today, and workers are out of jobs.
What has caused the bust? The modern-day economic orthodoxy continues to be unable to provide...

A Strong First Half of the Year, Followed by Another Retreat
In early 2016 gold had a big bull run. The precious metal rose close to 25% this year, pushed higher in a summer rally that peaked on July 10th. Gold experienced a bumpy ride over the remainder of the summer though, as investors became increasingly concerned about a potential rate hike by the Federal Reserve. Uncertainty returned to gold market and has intensified further since then.
Initially, gold rallied sharply...

The Trump Trade
After 35 years of waiting... so many false signals... so often deceived... so often disappointed... bond bears gathered on rooftops as though awaiting the Second Coming. Many times, investors have said to themselves, “This is it! This is the end of the Great Bull Market in Bonds!”
The long bond's long cycle – red rectangles indicate when the post 1980 bull market was held to be “over” or “over for sure” or “100% over”, etc. We have...

A Very Odd Growth Spurt in the True Money Supply
The growth rates of various “Austrian” measures of the US money supply (such as TMS-2 and money AMS) have accelerated significantly in recent months. That is quite surprising, as the Fed hasn't been engaged in QE for quite some time and year-on-year growth in commercial bank credit has actually slowed down rather than accelerating of late. The only exception to this is mortgage lending growth - at least until recently. Growth in...